District looks at delayed funding

Talk about it

Last week the Minnesota Management and Budget Department announced it will be delaying $423 million of payments to about two-thirds of the school districts in the state.

The Lake Superior School District will be one of them.

“We are confident we have adequate revenues in our reserves to cover our costs for the remainder of the fiscal year,” said Phil Minkkinen, district superintendent, in an email. “That is, of course, if the state can pay the money back on May 30 as they have stated they will. … If they do not pay us back on May 30, it may be difficult to cover our June payroll without borrowing money.”

State law requires the money to be repaid by the fiscal year’s end, which is June 30, but Gov. Tim Pawlenty has said he wants to pay districts back a month earlier.

Payments will be withheld beginning March 15, when district would have received $428,836. On March 30, it was supposed to receive $526,618 but will get $218,723. After that date, aid payments will resume as normal. The total withheld will be $647,559.

“The state is doing what it has to do to pay its bills,” school board Chairman Leo Babeu said. “We’ve been doing what we have to do to pay the bills. … I’m very grateful the number is smaller than anticipated.”

Originally it was thought the district would have to take about $1.8 million from its fund balance (basically a savings account) to recoup the losses.

“We will be using our reserves to cover our operating costs as a result of the delayed payments,” Minkkinen said. “We will have some loss in interest income, but the loss is not great.”

State law requires the administration to delay school payments before it can borrow from outside sources.

“The statute that allows, or actually requires the state to take this action before borrowing money, was enacted in 1986,” Minkkinen said. “It allows the state to withhold aid payments to school districts that have a per pupil fund balance in excess of $350. They have chosen to use a $700 threshold instead, so the impact on school districts is significantly less than it could have been. It still will hurt some districts and forces them to borrow money to maintain their cash flow and pay bills.”

“The students wouldn’t see any kind of coping strategy,” Babeu said. “We’ll do whatever it takes to keep cuts out of the classroom.”

Next budget

“At this point, the legislature has only acted to keep funding for the 2010-11 school year at the current level,” Minkkinen said. “The estimated budget deficit for the 10-11 school year is expected to exceed $2 billion, and likely to go higher, so it is possible that K-12 schools will see some reductions in funding going into the 2010-11 school year.”

Minkkinen said there is some discussion coming out of St. Paul committees to cut school funding by as much as $500 million to help the state balance the budget by the end of the 2009-11 biennium. It could mean a loss of almost $1 million for the Lake Superior School District.

Levy

The district hosted an informal workshop to discuss the upcoming levy.

“We discussed the amount of money we will likely be requesting, but there has been no official action taken on that,” Minkkinen said. “We have set a discussion group meeting to talk about our situation as a means to hear what community members are thinking and willing to support prior to a final decision on the amount of levy dollars the board would be requesting.”

Voting date options were also discussed at the meeting. Dates other than the general election in November, primaries, or city or township elections require a mail in ballot. “The board is leaning toward a May election, which would require the mail-in ballot,” Minkkinen said. “We did discuss ideas to inform the public of the election and why this is essential for the district to ask for this levy.”

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